Thursday, January 7, 2010

Thursday 1/7/10 Market Update

There are still many ways to describe the continued upward drift of the market in Elliott Wave terminology. We discussed one of those yesterday in which wave [iii] of ending diagonal C was underway. Because there have been so many small zigzags moving higher without substantial pullbacks the past few days, it is difficult to continue to find labellings that work well that structure. The pullback in the early hours today was a good start, but it really needed to be a 5 wave pattern to complete a flat. Instead, a double zigzag down unfolded. It seemed possible at first that this was wave [iv], but there was no wave [i] overlap, a standard occurrence in ending diagonals.

So a new count has been introduced that breaks down the upward zigzags into smaller components. It is the simplest structure that I can see and gives leeway for higher prices. The general idea is shown in the 15 minute chart above. If it is correct, wave (iii) or (v) within wave [v] of C of (Z) of [2] may be completing. There is also a chance that [2] topped and this is illustrated in the two 1 minute charts below.

I think this count works well with the waves seen recently. Waves (iii), (iv) and particularity (v) look abbreviated, but as I mentioned, they may not be complete. But because prices are riding along the upper line, perhaps only (v) is incomplete. Then again (iv) also looks shallow.

I would like to believe wave [2] is coming to an end so clarity (hopefully) returns to the waves again. If the above count is correct, perhaps there will be only one more small push higher tomorrow. Remember the unemployment results are due at 8:30 am EST tomorrow. Because of this, there should be clear movement in one direction or another following the news. Since room is running out on the upside, tomorrow would be a good day for the market to turn. I do not expect a gap down however.

A 15 minute chart of the Dow Jones Industrial Average is shown above. A new wave [2] high was finally made.

A linear daily chart is above. If wave B bottomed as shown above, B has reached the the 61.8% level of the extension of A.

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